Latest Insurance Fraud Stats UK: IFB Reaction & Insights

Here is some reaction and extra comment in response to the ABI stats on insurance fraud over the last year, from the IFB’s Director, Ben Fletcher;

“Improved reporting and easy access to shared intelligence are helping IFB members identify and close-down sophisticated criminal groups intent on harming businesses and their customers.”

“Although today’s announcement suggests the current strategy to tackle organised fraud is working, the broader picture is more complex.”

The nature of organised fraud is changing as criminal groups seek to exploit opportunities in areas such as application, property and liability fraud where collaboration and enforcement are less developed.

Motor insurance fraud remains the largest area overall

According to the ABI, the value of organised fraudulent motor insurance claims has increased from just under £96 million in 2017 to just over £99 million in 2018.

Crash-for-cash continues to be a key focus for the IFB with the volume of cases under investigation increasing almost 15% since 2017.

Operation Snowdon was a reminder that crash-for-cash scams continue to pose a very real risk. Following a highly complex investigation, a Metropolitan Police officer was jailed in July 2019 for fraudulently claiming more than £18,000 in personal injury liability after a meticulously planned staged accident.

Application fraud continues to grow

There is currently an urgent need for greater investment and industry collaboration to tackle the rapid rise in organised application fraud.

The volume of application fraud cases under investigation by the IFB has increased by more than 65% since 2017.

The scale and complexity of ghost broking operations have now reached an all-time high, with criminal organisations stealing customer’s identities using lucrative and unregulated online markets.

In May 2018, two fraudsters were jailed after a successful IFB and City of London police operation uncovered one of the largest ghost broking operations ever recorded.

It has recently emerged that the fraudsters had ties to an Albanian drug gang who were using legitimate policies obtained using stolen identities to avoid detection by the police.

Such cases prove beyond doubt that some forms of application fraud are often linked to wider organised crime, while helping to challenge the perception of fraud as a victimless crime.

Organised liability fraud is now the second largest area after motor in terms of volume

According to the ABI, detected liability fraud cases have increased from 1.6 million in 2017 to 1.8 million in 2018.

Drawn in by the potential for huge profits (often with relatively little risk) organised criminal groups are scaling up their operations by proactively sourcing new opportunities for fraud.

The IFB is increasing its focus on organised claims farming, especially in areas such as fraudulent cavity wall insulation claims.

Opportunistic fraud still represents the majority of fraudulent claims

According to the latest ABI data, 89% of the value of fraudulent insurance claims in 2018 were opportunistic in nature.

Opportunistic fraud is typically less predictable, making it difficult for insurers to anticipate the risk of a fraudulent claim.

Working with behavioural science specialists, the IFB has developed key recommendations to help insurers influence common patterns of behaviour that often lead to a fraudulent claim.

“We welcome the ABI’s renewed focus on getting to the facts about the extent of insurance fraud in the UK, but there remain big question marks over the methodology and how the ABI interprets the data.

For example, the ABI notes that there were 371,000 ‘dishonest’ insurance applications, but how many of those had criminal intent, and how many were software detecting that customers had filled in their forms incorrectly?

If the ABI separated genuine mistakes in applications from premeditated attempts to defraud insurers, we would get a clearer picture of the true extent of fraud. Most of us make mistakes from time to time filling in a form, but doesn’t mean we’re fraudsters.

We also note that 1,300 scams are uncovered every day but according to the ABI there are only two criminal convictions or cautions for insurance fraud per week. That’s a conviction rate of 0.0002%, despite the industry spending £250m a year to counter fraud. £2.4m per conviction is not a good return on investment.

The best definition of fraud is to measure actual conviction rates in the courts, and the best deterrent to fraudsters is for the police to prosecute criminals and the Courts to send them to prison.

Insurers have used fraud numbers to justify policy changes, but MPs and others have questioned the veracity of the figures.

We call for the ABI to submit their findings to independent peer review, for example from the Office for National Statistics, to give us all confidence that the report passes the ‘Ronseal test’ and does what it says on the tin. This process could be managed via a cross industry working party to produce independent and reliable fraud data, accessible to all, which drives a market-wide approach to tackling fraud.”